Understanding the mechanism of neural induction in early embryos is a long standing problem in developmental biology defined by the pioneering experiments of Mangold and Spemann. In the last decade, endogenous neural inducing substances have been identified in both vertebrate and invertebrate model systems which function by blocking signaling mediated by the Bone Morphogenetic Protein (BMP)pathway. BMP signaling acts in the non-neural ectoderm to suppress expression of genes defining the default neural fate. In the neuroectoderm, antagonists of BMP signaling, including Drosophila Short gastrulation (Sog), and its vertebrate ortholog Chordin, block this pathway thereby permitting the default neural cell fate program to prevail. Although the outline of how neural induction is mediated by BMP antagonists is now understood, several important questions remain. Foremost among these issues are: 1) how are BMP and Sog morphogen gradients created and stabilized in the context of a rapidly changing embryonic field of cells, and 2) how does a gradient of BMP activity form in the neuroectoderm and how does it interact with other sources of positional information to subdivide the nervous system into three primary domains expressing conserved sets of neuroblast identity genes? The overall objective of this grant application is to address these and related questions in ectodermal patterning and neuronal specification. The Specific Aims are: 1) Analyze mechanisms responsible for creating a dorsal BMP activity gradient 2) Analyze how Dpp contributes to subdividing the neuroectoderm into three territories The proposed experiments are important to human health. First, the process of neural induction is common to vertebrates and invertebrates. Consequently, insights gained from the proposed experiments will be applicable to early stages of human neural development. Second, defects in several genes involved in this process cause disease when mutated in humans. Also, dopaminergic neurons in the brain of Drosophila are similarly vulnerable to substances causing oxidative stress, as in humans. Therefore, our comparative studies in cell fate specification are relevant to using Drosophila as a model for drug addiction. These studies may provide the framework for our future studies relevant to human disease and drug abuse.